HOUSEHOLDS will be slugged by the West Australian budget because the state government "maxed out" spending on big projects and increased public sector wages, the new treasurer warns.
Mike Nahan, who replaced Troy Buswell as treasurer last month after the later allegedly hit several vehicles while driving home after a wedding, blamed the ailing budget position on falling revenue from sources such as payroll tax and iron ore mining.
Mr Nahan said that as revenue fell, spending on hospitals and a new stadium had racked up large debt.
He said capital investment was needed because of the state's strong population growth.
"We maxed out the spending because that's what the population wanted us to do," he told ABC Radio on Wednesday.
"The mistakes have been there but they haven't been pivotal."
Among the mistakes was the state government's "unrealistic deadline" for the Fiona Stanley Hospital and the botched Muja power station refurbishment, Mr Nahan said.
With the construction phase in WA having peaked, leading to softness in revenue flows, the state had to run "leaner and harder", he told Fairfax Radio.
Standard & Poor's downgraded WA's credit rating to AA+ in September last year, saying there was "limited political will" to implement Mr Buswell's "Fiscal Action Plan" to arrest mounting debt.
Mr Nahan warned it took eight years to get WA's AAA credit rating back after the Labor government lost it 1991 and the state was now dealing with a more volatile revenue stream.
He also blamed the state's weaker balance sheet on substantial public service wage increases for police, nurses and teachers.
Future pay rises would be at the inflation rate of 2.5 per cent, he said.
A freeze on public sector hiring and job advertisements will run until July 1, saving tens of millions of dollars, Mr Nahan said.
Exceptions would be made for some employees like police and specialist doctors, he said.
Mr Nahan said households would not be hit too harshly overall in the budget, but conceded a promise to keep electricity price increases in line with inflation would be broken.
In the lead-up to last year's state election, Premier Colin Barnett pledged to keep electricity price rises "at or around the rate of inflation".
But Mr Nahan said on Wednesday that the government would "struggle to meet inflation".
He said that one of the most "painful" things the government had to do was increase the price of electricity by 80 per cent over six years while the subsidy had blown out by 200 per cent.
He insisted the "household basket" of charges by the state were the lowest in the country.
He told reporters the "fundamental problem" of the electricity industry was the cost.
"We are going to strip the costs out of the system rather than just pile it onto consumers," he said.
The budget will be delivered on May 8.
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